Lincoln Institute of Land Policy Cambridge, Massachusetts February 9, 2007 F ederal Constitutional Challenges to State Property Tax Assessment Limitations Walter Hellerstein Shackelford Professor of Taxation University of Georgia Law School

Overview Property Tax Assessment Limitations Federal Constitutional Limitations Application Proposition 13 Save Our Homes - Portability

Property Tax Limitations 43 States Impose Rate, Assessment, or Revenue Limitations 34 states impose rate limitations 29 states impose revenue limitations 20 states impose assessment limitations 12 states (including CA and FL) have statewide limitations on increases in taxable value of residential properties

Tax Assessment Limitations Limitation Linked to Percentage Change from “Base Year” Assessment Generally 3-5% Limitation Available to Defined Group Seniors, disabled, etc. Improvements Excluded Transfer Triggers Reassessment Property Owners Must Apply for Benefit

Federal Constitutional Limitations Ad Valorem Property Taxation: Overview Property taxes are generally local – not state – taxes Federal constitutional limitations apply to with full force to local taxes Localities are subdivisions of the state subject to same restraints Federal constitutional restraints are evaluated at state, not local level No impact on intrastate allocation of taxing power

Federal Constitutional Limitations Explicit Limitations on State Tax Power Import-Export Clause Duty of Tonnage Provision Other Federal Constitutional Restraints Equal Protection Clause Commerce Clause “Interstate” Privileges and Immunities Clause (Art. IV) Fourteenth Amendment Privileges and Immunities Clause Right to travel Due Process Clause Intergovernmental immunities

Challenges to Discriminatory Property Tax Assessments Fair market value regime Assessment based on recent sales price Gross disparities in assessments Principle of equality in assessments Allegheny Pittsburgh (1989) No defense offered for disparities

Challenges to Discriminatory Property Tax Assessments Proposition 13 Assessments limited to 1% of Valuations Annual increases capped at 2%, unless sold Bases for Constitutional Challenges Commerce Clause Right to Travel Equal Protection Clause

Challenges to Discriminatory Property Tax Assessments Commerce Clause Challenge to Proposition 13 The case that wasn’t: R.H. Macy Right to Travel Challenge to Proposition 13 The case that wasn’t: Nordlinger Court acknowledged possibility of attack on portability feature of Proposition 13 Equal Protection Challenge to Proposition 13: The case that was: Nordlinger

Challenges to Discriminatory Property Tax Assessments Florida’s “Save Our Homes” Provision Limits increases in homestead property tax assessments to 3% over prior year’s value or percentage increase in Consumer Price Index, whichever is less Proposals to make Save Our Homes differential portable Applies to those move from one Florida homestead to another Florida homestead

Challenges to Discriminatory Property Tax Assessments Challenging Save Our Homes Portability Provision: Equal Protection Nordlinger Redux Challenging Save Our Homes Portability Provision: Commerce Clause Applicability of Commerce Clause Camps Newfound/Owatonna

Challenges to Discriminatory Property Tax Assessments Challenging Save Our Homes Portability Provision: Commerce Clause Substantive Commerce Clause Analysis Discrimination “Completeness” issue (Dean Milk) Facial discrimination Discrimination in effect Cost of interstate relocations Effect on interstate mobility

Challenges to Discriminatory Property Tax Assessments Challenging Save Our Homes Portability Provision: Commerce Clause Substantive Commerce Clause Analysis Fair Relation Between Taxes and Services Provided by State

Challenges to Discriminatory Property Tax Assessments Challenging Save Our Homes Portability Provision: Interstate Privileges and Immunities Clause No explicit residence-based discrimination Second homes cases (Reinish v. Clark)

Challenges to Discriminatory Property Tax Assessments Right to Travel: Background Case Law Edwards v. California (1941) Knowingly transporting indigents into state Zobel v. Williams (1982) Distributing state funds based on length of residence Shapiro v. Thomson (1969) Durational residency requirement for welfare benefits Dunn v. Blumstein (1972) Durational residency requirement for voting Memorial Hospital v. Maricopa County (1974) Durational residency requirement for nonemergency medical services

Challenges to Discriminatory Property Tax Assessments Challenging Save Our Homes Portability Provision: Right to Travel Saenz v. Roe (1999) Right of a citizen of one state to enter and leave another state Right to be treated as a welcome visitor rather than an unfriendly alien when temporarily present Right of newly arrived citizen to the same privileges and immunities enjoyed by other citizens of the same state

Challenges to Discriminatory Property Tax Assessments Challenging Save Our Homes Portability Provision: Right to Travel Saenz principles applied: limiting welfare benefit to new residents invalid Citizens right to be treated equally in her new state of residence (interstate travel at an end) No question about bona fides of residence Fiscal defense irrelevant (no tolerance of degrees of citizenship based on length of residence)

Challenges to Discriminatory Property Tax Assessments Challenging Save Our Homes Portability Provision: Right to Travel Saenz principles applied: Save Our Homes Citizens right to be treated equally in her new state of residence Bona fides of residence unquestionable Fiscal defense irrelevant (no tolerance of degrees of citizenship based on length of residence)

Challenges to Discriminatory Property Tax Assessments Challenging Save Our Homes Portability Provision Distinguishing Saenz No explicit distinction between new and old residents Discrimination is “incomplete” Needs of newly arrived residents for assessment benefits less compelling than newly arrived residents for welfare benefits No obvious “fix”

CONCLUSION